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Orient Paper & Industries Ltd. (ORIENTPPR) - Director Report

Company director report

Dear Shareholders

We are pleased to present the annual report along with the audited accounts of yourcompany for the year ended 31st March 2018.

The demerger of company's Electric business into a separate company Orient ElectricLimited was completed during the year. This has paved the way for shareholders of theCompany to participate directly in a focused entity engaged in the Consumer Electricbusiness. We are confident that this pragmatic step will yield rich dividends in the longrun and lay a strong foundation for future growth of both Paper & Electric businesses.

Financial results

The financial performance of the Company for the year ended 31st March 2018 issummarised below:

(Rs. in crores)

Particulars

2017-18

2016-17

Gross Sales

671.80

547.68

Total Revenue (net of excise)

661.36

511.49

Earnings before Interest Depreciation Amortisation & Taxation

123.11

51.51

Interest/Finance costs

14.69

20.60

Profit before Depreciation and Taxation

108.42

30.91

Depreciation

28.31

25.18

Profit before Taxation

80.11

5.73

Taxation

30.82

(5.15)

Profit for the year from Continuing Operations

49.29

10.88

Profit from Discontinued Operations (net of taxes)

-

27.04

Profit for the year

49.29

37.92

Other Comprehensive Income

94.35

104.48

Total Comprehensive Income

143.64

142.40

STATEMENT OF RETAINED EARNINGS

At the beginning of the year

796.20

795.70

Add: Profit for the year

49.29

37.92

Add: Transfer from FVOCI - sale of equity investments (net of taxes)

30.68

-

Less: Other Comprehensive Loss (net of taxes)

0.57

1.26

Dividend on Equity shares

29.71

5.12

Corporate dividend tax

6.05

1.04

Transfer to General Reserve

-

30.00

At the end of the year

839.84

796.20

EPS (H)

2.32

0.53

Indian Recounting Standards

The Ministry of Corporate Affairs (MCA) vide its notification in the Official Gazettedated February 16 2015 notified the Indian Accounting Standards (Ind AS) applicable tocertain classes of companies. Ind AS has replaced the existing Indian GAAP prescribedunder Section 133 of the Companies Act 2013 read with Rule 7 of the Companies (Accounts)Rules 2014. For the Company Ind AS is applicable from April 1 2017. Accordingly theseaccounts have been prepared as per Ind AS. The areas which had an impact on account oftransition to Ind AS have been reported in the notes to the financial statements.

Share Capital

There was no change in the share capital of the Company during the financial year2017-18.

Dividend

Subject to the shareholders' and other requisite approvals your Directors recommendpayment of final dividend of Re. 0.60 (60%) per equity share of Re. 1 each. This is inaddition to the Interim Dividend of Re. 0.40 (40%) per equity share of Re. 1 each declaredon 1st February 2018 by the Board of Directors of the Company bringing the total dividendfor the year Re. 1/- (100%).

Economic climate and our performance

The year under review has been quite eventful for the Indian economy with far reachingreforms like introduction of GST and demonetization. We believe that GST is a welcome andpositive reform which will be greatly beneficial for our country's economic growth eventhough it caused some slow down during first half of the year. The fact that the India'sGDP growth already saw a rebound to register a growth of 7.2% in 3rd quarter of the yearis a clear indication of the fact that the Economy is back on a sustainable growth path.

This is the first full year of stand-alone results of your company's Paper businessafter demerger of electric business. We are happy to report that the Paper business hasperformed quite well to record its best ever results both in terms of volumes and value.

We commissioned our tissue expansion project ahead of schedule on 1st May 2017 andachieved highest ever production and sales volumes for paper as well as caustic. Withupgradation in quality of our products and richer product-mix our sales realization alsoincreased resulting in substantial increase in our operating income.

At the same time we could also achieve significant reduction in costs and improvementsin efficiencies.

As a combined result of these factors profitability of the paper business has been thebest ever. The resultant cash surpluses have been most prudently deployed to upgrade plant& equipment with reasonably short pay-back periods and to reduce our total debtssignificantly.

We do believe that the growth and profitability achieved this year should not only besustainable but could gain further momentum ahead.

Sustainable Development and Environment

We consider sustainable development and environment protection as integral part of ourmanagement culture and philosophy. Accordingly we have made significant furtherinvestments to meet or exceed all the environmental norms for the Paper industry. In thiscontext it is noteworthy that we have become the first integrated paper company to achieveZERO LIQUID DISCHARGE. We also continued our focus on helping the farmers and land ownersaround our plant in growing trees through our extensive social forestry initiatives.Details of our efforts and activities in this direction are provided in subsequentchapters in this report. We are determined to further intensify these efforts on aconsistent and sustainable basis.

Cash Flow Analysis

In conformity with the provisions of Regulation 34 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the cash flow statement for the year ended31st March 2018 is included in the annual accounts.

Corporate Governance

Your Company is in full compliance with the Corporate Governance requirements in termsof SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. A report onCorporate Governance and a certificate from the auditors confirming compliance with theCorporate Governance requirements are attached.

Management Discussion and Analysis

The Management Discussion and Analysis Report for the year under review as stipulatedunder SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 isattached.

Deposits

The Company has not accepted any deposit from public falling within the ambit ofSection 73 of the Companies Act 2013 and the Company's (Acceptance of Deposits) Rules2014.

Particulars of Loans Guarantee and Investments

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 ore given in the notes to the Financial Statements.Corporate Social Responsibility

Pursuant to the requirement of Section 135 of the Companies Act 2013 a CorporateSocial Responsibility (CSR) Committee was constituted. Details of the CSR activities asrequired under Section 135 of the Companies Act 2013 are given in the CSR Report os

Annexure I.

Extract of Annual Return

The extract of Annual Return in form MGT 9 is annexed herewith as Annexure II.

Directors and Key Managerial Personnel

Directors

(i) Resignation

During the year Shri B. K. Jhawar (DIN: 00086237) an Independent Director of theCompany has resigned from the Board of the Company with effect from 1st February

2018. The Board of Directors placed on record their deep appreciation for his immenseand valuable contribution to the growth and development of the Company during his longtenure as a director of the Company.

(ii) Re-appointment

The term of appointment of Shri M. L. Pachisia (DIN 00065431) as the Managing Directorof the Company ended on 31st March 2018. The nomination & Remuneration Committee andthe Board of Directors of the Company at their respective meetings held on 1st February2018 approved the re-appointment of Shri M. L. Pachisia as Managing Director (a KeyManagerial Personnel) from 1st April 2018 to 31st March

2019 subject to the approval of shareholders of the Company. Accordingly the approvalof the shareholders is being sought for his re-appointment as Managing Director of theCompany.

(iii) Retirement by rotation

In accordance with the provisions of Section 152 Companies Act 2013 Shri C. K. Birla(Din: 00118473) Director of the Company retires by rotation and being eligible offershimself for re-appointment.

(iv) Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and the SEBI (Listing Obligations& Disclosure Requirements) Regulation 2015 the Board has carried out an annualperformance evaluation of its own performance the directors individually as well as theevaluation of its various Committees. The manner in which the evaluation has been carriedis explained in the Corporate Governance Report.

(v) Board Meetings

The details of meetings of the Board and its various committees are given in theCorporate Governance Report.

none of the Directors are disqualified under Section 164(2) of the Companies Act 2013.

All the Independent Directors have given their declaration confirming that they meetthe criteria of independence in terms of Section 149(6) of the Companies Act 2013.

Auditors & Audit Reports

(i) Statutory Auditors

The Shareholders of the Company at the Annual General Meeting held on 9th August 2017appointed M/s. Price Waterhouse & Co. Chartered Accountants LLP (FRn 304026E/E-300009)as the Auditors of the Company for a period of 5 years subject to ratification of theappointment by the Members at every Annual General Meeting.

Accordingly members are requested to ratify appointment of M/s. Price Waterhouse &Co. Chartered Accountants LLP (FRn 304026E/E-300009) the Auditors of the Company to holdoffice from the conclusion of the ensuing Annual General Meeting till the conclusion ofthe next Annual General Meeting of the Company. The Auditors have confirmed theireligibility under Section 141 of the Companies Act 2013 and the rules framed there underfor re-appointment as Auditors of the Company.

The Auditors' Report for the financial year 2017-18 does not contain any qualificationreservation or adverse remark. Further in terms of section 143 of the Companies Act 2013read with Companies (Audit and Auditors) Rules 2014 as amended notifications/circularsissued by the Ministry of Corporate Affairs from time to time no fraud has been reportedby the Auditors of the Company where they have reason to believe that an offence involvingfraud is being or has been committed against the Company by officers or employees of theCompany.

note No. 54 appearing in the Notes to Financial Statements referred to in the Auditors'Report is self-explanatory.

(ii) Cost Ruditor

Pursuant to Section 148 of the Companies Act 2013 and rules made there under ShriSomnath Mukherjee Cost Accountant (Membership no. M/5343) was appointed for the financialyear ending 31st March 2018 to conduct cost audit for the products covered under the saidrule. The Board of Directors of the Company on the recommendation of the Audit Committeehas further appointed Shri Somnath Mukherjee Cost Accountant as Cost Auditor for auditingthe cost accounts of the Company for the financial year 2018-19. The Auditor has confirmedhis eligibility under Section 141 of the Companies Act 2013 and the rules framed thereunder for appointment as Cost Auditor of the Company.

(iii) Secretarial Ruditor

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Shri A. K. Labh Company Secretary in Practice (CP Regn. no. 3238) to undertakethe Secretarial Audit of the Company for the financial year 2017-18. The Report of theSecretarial Auditor is annexed to this report as Annexure III. The comments mentioned inthe Secretarial Audit Report are self-explanatory.

The Board of Directors of the Company has further appointed Shri A. K. Labh CompanySecretary in Practice to undertake the Secretarial Audit of the Company for the financialyear 2018-19.

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is attached herewith as Annexure IV.

The prescribed information of Employees required under Section 134(3)(q) read with Rule5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 isattached herewith as Annexure VI.

Subsidiary Company

Orient Electric Limited has ceased to be a wholly owned subsidiary of the Company sincethe Scheme of Arrangement between the Company and Orient Electric Ltd. having beeneffective. Accordingly shares held by the Company in the said subsidiary stand cancelledin terms of the Scheme of Arrangement.

Related Party Transactions

All transactions entered into with Related Parties as defined under the Companies Act2013 and Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 during the financial year were in the ordinary course of business andon arm's length basis.

All the Related Party Transactions are presented to the Audit Committee and the Board.Prior omnibus approval is obtained for the transactions which are foreseen and repetitivein nature. A statement of all related party transactions are presented before the AuditCommittee and Board of Directors on a quarterly basis specifying the nature value andterms and conditions of the transactions. Particulars of contracts or arrangements withrelated parties referred to in sub-section (1) of Section 188 have been given in theprescribed form AOC -2 as Annexure VII. The Related Party transactions Policy as approvedby the Board is uploaded in the Company's websitehttp://orientpaperindia.com/codes-policies.

Remuneration Policy

The Board has on the recommendation of its nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Key Managerial Personnel andSenior Management and their remuneration. The Remuneration Policy is stated in theCorporate Governance Report.

Risk Management

Pursuant to Section 134 of the Companies Act 2013 and Regulation

17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 theCompany has adopted a risk management policy. The policy comprises of a robust businessrisk management framework to identify evaluate and mitigate potential business risks. Thebusiness risk framework defines the risk level including documentation and reporting.

Whistle Blower Policy

The Company is committed to adhere to the highest standards of ethical moral and legalconduct of business operations. In line with these objectives the Company has adopted aVigil Mechanism Named Whistle Blower Policy to deal with instances of fraud andmismanagement.

Details of the Whistle Blower Policy are stated in the Corporate Governance Report. Weblink for the policy in the website is http:// orientpaperindia.com/codes-policies.

Prevention of Sexual Harassment of Women at Workplace

It has been an endeavor of your Company to support women professionals through a safehealthy and conducive working environment by creating and implementing proper policies totackle issues relating to safe and proper working conditions for them.

The Company as required under the provisions of the "The Sexual Harassment ofWomen at Workplace (Prohibition Prevention and Redressal) Act 2013" has framed aPolicy on Prohibition Prevention and Redressal of Sexual Harassment of Women at Workplaceand matters connected therewith or incidental thereto.

The Company has not received any complaint under the said policy during the year. Weblink for the policy in the website is http://orientpaperindia.com/codes-policies.

Internal Financial Controls with reference to Financial Statements

The Company has adequate internal financial control procedures commensurate with itssize and nature of business. The Company has identified and documented all key internalfinancial controls which impact the financial statements as part of its StandardOperating Procedures (SOP). The SOPs are designed for all critical processes across allits plants and offices wherein financial transactions are undertaken. The Financialcontrols are tested for operating effectiveness through ongoing monitoring and reviewprocess by the management and independently by the Internal Auditors. In our view theInternal Financial Controls affecting the financial statements are adequate and areoperating effectively.

Material Changes and Commitment Affecting Financial Position of the Company

There are no material changes and commitment affecting financial position of theCompany which has occurred between the end of the financial year of the Company i.e. 31stMarch 2018 and the date of this Report.

Significant and Material Orders Passed by the Regulators or Courts

There are no significant material orders passed by the Regulators/ Courts which wouldimpact the going concern status of the Company and its future operations.

Acknowledgements

Your Directors place on record their sincere gratitude to the shareholders customersbankers financial institutions government agencies supply chain partners and theemployees for their valuable contribution co-operation and support in the Company'sendeavors to achieve continuous growth and progress.